The $1.21bn price tag of workplace racism

Racial inequity is taking a significant toll on workplaces and the broader economy, particularly for Indigenous employees, according to new research.

A report from the Centre for Indigenous People and Work (CIPW), The Cost of Workplace Racism and Racial Inequity, has highlighted the significant economic impact of workplace racism and racial inequity on Aboriginal and Torres Strait Islander employees and non-indigenous employers.

The report estimated that Indigenous employees could face more than $908,000 in employment-related costs over a 45-year career, while racism-related staff turnover could cost employers up to $1.21 billion annually.

The findings revealed the financial consequences of workplace inequality and reinforced the importance of proactive employer action to mitigate racism and create workplace environments that are more inclusive and fair.

HR Leader spoke exclusively with CIPW assistant director Joshua Gilbert about the costs of racial inequity and how human resources teams can take urgent action to mitigate such circumstances.

The hidden career cost of Indigenous workplace inequality

Gilbert highlighted that the financial toll of workplace inequality for Indigenous Australians is significant, with systemic barriers and undervalued contributions resulting in substantial losses over the course of a working life.

“Inequality in the workplace could cost the average Indigenous worker nearly a million dollars over their working life,” Gilbert said.

“That figure combines the average hourly Indigenous pay gap of 16 per cent with an average 2.38 hours per week spent doing unpaid cultural, mentoring and other work outside of their role.”

Gilbert recognised that structural racism limits Indigenous workers’ pay and career progression, with financial losses extending beyond individuals to their families, communities, and the wider economy.

“Our research with Indigenous Business Australia found that only 30 per cent of the Indigenous pay gap can be explained by traditional labour factors like job type, hours worked, age, and education,” he said.

“The reality is that structural racism means Indigenous workers often start on less money, are overlooked for promotions, held back by extra care responsibilities, and expected to provide their cultural skills and knowledge for free.

“That huge hit to the individual worker is also money that does not flow through to households, communities, and the wider economy.”

The economic impact of racism

The research highlighted how workplace racism and pay inequity can leave Aboriginal and Torres Strait Islander employees financially disadvantaged, with unpaid responsibilities further widening the gap.

It also uncovered the economic cost to employers, as racism increases employees’ intentions to leave, creating significant staff turnover expenses.

“The ethical argument has been made for decades, and yet we are still having this conversation,” Gilbert said.

“This figure makes a business case that unsafe workplaces are expensive workplaces, and that’s something no employer should ignore.

“Our Gari Yala 2 (Speak the Truth) survey of more than 1,100 Indigenous workers found those who experienced racism were three times more likely to be looking to leave their job.

“Replacing those who do quit could cost Australian business[es] as much as $1.21 billion every year, and addressing racism is key to saving that hit to bottom lines, and the economy.”

Creating safer and fairer workplaces

To address these systemic issues, recommendations from experts such as Gilbert have pointed towards structural reforms and proactive organisational measures.

“A legislated positive duty for employers to tackle workplace racism under the Racial Discrimination Act would ensure proactive approaches are embedded in workplaces across the country,” Gilbert said.

“It would mean racism is treated in the same way as sexism.

“But employers don’t need to wait for that.

“Our research shows that Reconciliation Action Plans are highly effective in driving down racism, and the effect compounds when employers introduce anti-discrimination training and complaints procedures.”

Gilbert added that proper recognition of cultural contributions is vital to building fairer workplaces.

“Making sure work that draws on cultural knowledge and skills is reflected in position descriptions and pay decisions is also essential to improving Indigenous equality in the workplace,” he said.

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